The iPad Mini: Has Apple lost its way?

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Just when we thought that the iPad Mini had been consigned to vaporware heaven, Apple has sent out invites for a special event on October 23. With the tagline “we’ve got a little more to show you,” the star of the show will be a 7.85-inch iPad Mini. Depending on which rumors you believe, the diminutive iPad could also be flanked by a 13-inch MacBook Pro with Retina display, an Ivy Bridge-powered Mac Mini, and updated full-size iPads with the new Lightning connector.

I have no doubt that the iPad Mini, like its larger sibling, will be incredibly successful. It will almost certainly be the biggest selling tablet this Christmas, beating out the Kindle Fire, Nexus 7, and Microsoft Surface. (And yes, in case you were wondering, Apple’s has intentionally timed its iPad Mini unveil to take as much wind out of Microsoft’s sails as possible. I wouldn’t be surprised if the iPad Mini starts shipping on October 26, the exact same day as the Surface.)

There’s this nagging feeling in the pit of my stomach, though, that Apple is cutting off its nose to spite its face. I cannot get over the feeling that the iPad Mini is a reaction to the Nexus 7 and Kindle Fire, rather than the result of a Jony Ive or Steve Jobs epiphany. After an epic run of revolutionary and evolutionary devices that resulted in Apple becoming the most valuable company in the world, the iPad Mini sounds like a me-too device with the sole purpose of stemming the 7-inch tides and making a quick buck.

Then there’s the iPad Mini price. We won’t know for certain until next week, but one leak has pegged that iPad Mini at €250, which, given Apple’s current pricing scheme, will probably equate to £200 in the UK and $250 in the US. At $50 more than the Nexus 7 or Kindle Fire, Apple will still command a decent profit margin — but at what cost? At $250, the iPad Mini would be $50 cheaper than the 4-inch iPod Touch, which starts at $300. At $250, the iPad Mini would be half the price of the full-size iPad 3!

At $250, it’s impossible to imagine that the iPad Mini won’t completely gut the sales of the iPod Touch and iPad 3. Just think about it: Would you spend $50 more for a device with a screen that’s half the size of the iPad Mini? Would you spend $250 more for a device with a screen that’s just a couple of inches larger than the iPad Mini?

Apple could minimize the risk of cannibalism by pricing the iPad Mini at $300 — but then it’s a full $100 more than its 7-inch competitors. The Apple marque is definitely worth a lot, but maybe not quite that much. Anyway, even at $300, Apple would still have a 4-inch and 7.85-inch device at the same price point — and you could still save $200 by opting for the Mini, rather than the full-size iPad.

One of the main reasons that Apple is worth so much is that its profit margins are huge. Its iPhones and iPod Touches cost around $170 to build, and they sell for between $300 and $800. The 9.7-inch iPads, with their larger screens, cost slightly more — around $300 to build — but again, they sell for between $400 and $800. An iPad Mini would cost about $200 to build, and yet it will probably go on sale for $250 or $300. There will certainly be higher-end models with better profit margins, but the cheapest model will probably be the most popular. Just imagine — being able to get your hands on an Apple tablet for just $250…

In the short term, then, the iPad Mini will almost certainly be a huge hit — but whether it will actually improve Apple’s bottom line or shareholder sentiment remains to be seen. Another possibility, though, is that Apple knows more than we do. Apple might already know that the 10-inch tablet market is drying up, and that a swift segue into the 7-inch segment is a commercial necessity. This seems unlikely, though, considering the full-size iPad enjoyed record growth of 17 million units last quarter.

But who knows: Maybe this is Apple signaling that it’s finally ready to compete for the mass market, rather than skimming creamy profits from the top. Perhaps Apple knows that its 50% share of the tablet market can’t last for ever, and the only way to prevent marginalization — like in the PC market — is to wade in and do battle with the commodity tablets. We’ll find out for certain next week.

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Will Mills

I am sorry maybe I am missing something but why a mini? Who would buy that you have the Ipod Touch and the IPad. Do you really need something in the middle. I know there will be the apple drones that will buy everything Apple throws out, but come on really?

mjandres

I will buy it if it suit my taste since the ipod touch is so small and the the ipad so big for me.

http://www.facebook.com/nicholascapone Nick Capone

If you own an iPhone, you really have no purpose messing with an iPod touch. The Mini is viewed more as the economical alternative to the very pricey iPads.

http://twitter.com/jared889 sergio

there is no way a mentally healthy rich person will buy an apple toy

Alex Pelley

Because there is a huge market for mini tablets. Look at the Kindle Fire. They’re more affordable, and just as good for consuming content as a full sized tablet.

The Nexus 7 blows away the Kindle Fire and the ipad. Google could own the mini tablet market, it they fail to blanket advertise like Apple.

Alex Pelley

That’s like saying “I would have aced that test, if only I had got all the answers right.”

Marketing a product is crucial, especially in a market that is dominated by a player who has a ridiculously high mindshare among consumers. From a tech-nerd point of view, sure you can say the Nexus 7 is superior. But that doesn’t matter when from a business point of view Google dropped the ball.

It doesn’t matter if Google “could own” the mini tablet market. They don’t. “Could have” doesn’t carry you very far in the business world.

http://www.facebook.com/people/Jack-Handy/100002004745555 Jack Handy

Because there are actually people out there that are not you. The iPad is too big for ME. I know it’s not too big for you. But I am a totally different person than you. There are millions of us that have a different opinion than you. No, really. It’s true.

I travel and commute, and an iPad mini is the perfect size. The iPad is too big. I’ve tried it. The Touch (which I have) is too small for reading. The Mini is the perfect size for millions of people.

Will Mills

I do not own a tablet at all actually I think anything bigger then a phone and smaller then a laptop is a waste of space. My advice to you… get a smart phone and a pair of glasses sounds like you need them.

Xellion

so what you are saying is rather than buy a better priced tablet that will do the exact same things (in some cases better, ie multi tasking), you’d rather buy an miniature ipad? what is the rationale here?

why spend the extra money for less?

Alex Wilson

I’m interested to see how many current ipad owner will buy a new one just because it has the Lightning connector. I suspect the numbers will be shockingly high.

Alex Pelley

I suspect not, if you could even find statistics for such a silly thing.

Alex Wilson

Even 0.25% would be shockingly high.

FrillArtist

There is a market cap for apple and this icrap will expose it.

http://profile.yahoo.com/EOLRU32NQ7MB2PV2LNO6BDLZF4 John

No pad for me, I’ll stick with my 13″ Macbook Pro and it’s old fashioned trackpad and keys and it’s dated DVD drive any day. I would buy an Air first.

bubbalump

At $250, how much storage will it have? a $300 iPod has 32 GB. If this is on-par with a $200 Fire, it will have half that and be ad-revenue aided. Take off the ads and the Fire is $215. Its really hard to compare ‘Apples to Apples’ if you don’t know the storage.

http://www.mrseb.co.uk/ Sebastian Anthony

I think the 250 euros leak indicated that the base model would be 8GB, WiFi only.

It really depends on what the dollar price is though, I guess.

BowerikWowbagr

8 GB would be unbearable

http://spiralthis.tumblr.com Spiral

Lost their way? no. The iPad is quite big and heavy, and 7″ tablets are a really nice size. I’ve used the Nexus 7 a lot, and always wished it ran iOS. Guess this story gets page hits though!

Xellion

what?

how are you on a tech site and prefer IOS over android?

ios is weak, boring and old… the limitations make even OK looking hardware as bland as the OS itself

http://spiralthis.tumblr.com Spiral

I really didn’t think Android was that much different to iOS. So they are both as ‘bland’ as each other.

Android runs circles around iOS in terms of functionality, and customizability, and it’s getting to be just as sooth. Steve Wozniak even stated that Android is what iOS should have been.

Alex Pelley

Steve Wozniak is also a hardcore nerd (I mean that in a good way) who has vastly different needs than the average mass market consumer.

When will people understand that THEIR unique technology needs are not the same as everyone else’s?

iOS clearly serves a niche of users very well, and Android clearly serves a different niche very well. Arguing over which niche is better is just pointless.

Alex Pelley

Millions of people prefer iOS. Millions of people prefer Android. Why is there any need to hate on one OS or the other? They serve different needs for different people, and the fact that both exist and are successful is a testament to the value they bring to their users.

Clearly YOU get more value out of Android, but that doesn’t mean that all people do.

Alex Pelley

Cannibalizing ipod touch sales is a good thing, and I would guess is fully intentional on the part of Apple.

iPod sales have been decreasing for years, and dedicated MP3 players are on the way out. There just isn’t a huge market for an MP3 player when most people have a smartphone.

By pricing the iPad mini less than the touch, they make the decision easy for any buyer. Most people will buy the iPad mini, and Apple can slowly phase out the touch line. If they just outright stopped making the touch, people would throw a fit. But by making a device that steals demand for the touch, they can let their customers phase the touch out of existence.

And I don’t think it really matters much whether or not this cannibalizes iPad sales. Sure, some people will buy this over an iPad, but many many more people will buy a mini that never could have afforded/justified paying $500+ for a full sized iPad. Though it might steal a few sales from full sized iPads, the full effect will be to bring in a massive flush of new tablet customers who otherwise would have gone to an Amazon or droid tablet.

Yes, the iPad mini is a reactionary product, but so what? This isn’t a me-too device in the way that the first crop of Android tablets were. This isn’t a company with no tablet experience suddenly jumping into a crowded market. This is the market dominator taking everything they know about making a great tablet, and putting it in a form factor that the market has shown there is a huge demand for. There is no question that this will be a quality tablet. I see nothing wrong with reacting to market demand.

http://www.mrseb.co.uk/ Sebastian Anthony

Well said! Thanks for stopping by to comment :)

http://pulse.yahoo.com/_45UDKTKDAM2NTQN75SX3XPKSPU Gary

Excellent analysis, Alex! The mini will be a very strong competitor to similarly-sized Android tablets but have very little impact on the larger-sized market exemplified by the standard iPad. As for the iPod, Apple has the additional option of reducing its price a bit, which would decimate both competing mp3 players and the low end of the Android tablet market while greatly increasing iPod sales.

BowerikWowbagr

The $250 iPad mini is going to be an 8 GB model, which will exactly be like a kidney punch when trying to juggle apps, videos, photos, music, and other filez.

Xellion

i dont understand the draw to a 7 inch ipad… IOS is out dated, page on page of icons with limited OS functions…

why pay so much more for what is an inferior product? i just dont get it.

http://twitter.com/just_guillermo Guillermo

the mini will sell to many people that in no way would have spent $500 on the ipad, it’s that simple, but would still love to own an apple device, so here it is, a much less expensive ipad in a 7′ form factor. it’s lighter, women can toss them in their purse, and you can hold itwhile you read, and your arms won’t get tired, and I’m one of those people that couldn’t justify spending $500, so this ipad mini sounds great to me, but….I’m holding off on it, due to that rumored 32GB Nexus 7 that could sell for $250.

ptmmac

I would say you are over reacting to a rumored price point. The press is looking for Apple to stumble, and in many ways so are their fans. The loss of Steve Jobs at Apple has been a gut punch from the very first. It has taken a lot of air out of the system. The seven inch tablet form factor can almost be considered blessed by Steve, just because he claimed that Apple would never make this product. Steve had a habit of lying to the press about his future plans. Classic misdirection from the very first time he said it.

The very real problem facing Apple is the big data, cloud based back ups and increasing power for the user from within a locked down system. The fact that Amazon is even considering a suicide pact with Motorola is just one more proof that Apple is so far ahead of everyone else, that they don’t know what to do. Apples weak spots are internet based data storage, cloud services, and search. All of these are extremely hard to do and keep the simple interface Apple favors. These weaknesses in the company are more a reflection of Steve’s own weaknesses. It was very telling that Steve had to ask the Mobile Me team what they were supposed to be doing before he could chastise them for not doing it.

I think that Jonny Evans over at Computerworld is more correct to be focusing on the purchase of Particle. It is the laser like focus on small companies such as Particle that complement Apple’s own team that has made Apple so effective in growing it’s own reach. Intrinsity and the Strong Arm team both have been folded into Apples homegrown CPU unit and the A6 processor in the new iPhone is a direct result of this. Intel is not really happy about Apple stealing the march on the largest CPU market in the world. The game is not over here, but it is clear that Apples aggressive search for a processor that could fit it’s very specific design vision was the impetus behind Intel’s new found focus on the Atom processor.

Mark Freedman

Classic Apple link bait article – how about sparing us the clueless WWSJ do insights.

real__world

At last, someone has given a rationale thought to the mini iPad as wherever Apple position themselves price wise, they are effectively screwing themselves. Additionally whilst there’s a clear separation between true 5, 7 and 10 inch tablets/notes the iPad has a smaller screen than most 10 inch competitors and the mini iPad will have a bigger screen than most competitors. Where does it place the mini iPad even within its own product line up.

EnigmaV8

How could it be a Steve Jobs epiphany if he’s been dead for over a year. This tablet hasn’t been in the work that long. Poor taste much?! (And I’m an Android/Microsoft guy)

http://www.facebook.com/profile.php?id=874095074 facebook-874095074

It’s a grave a symptom of a world gone insane on greed and consumption. “Cannibalizing iPod Touch”… Alex, I believe it is far worse. We are cannibalizing our Planet. The old adage, “He who dies with the most toys wins” will bring us all to an early demise and coronation of said winner.

wave1710

There is a demand for devices of all sizes, why in the world would the original iPad signify the standard? The original iPad may have hit a nerve, but the market has expanded. I’m surprised it took Apple this long to realize this. The minipad signifies Apple regaining it’s balance, not losing it.

Harry_Wild

I been waiting for a retina quality mini screen in a tablet for a while now. If the iPad mini does have that high resolution as the iPad3! I going to buy it! No questions ask!

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